Dollar Parachutes

By Joel Dresang

A friend from college told me that she and her husband were out of work at least some time in the last year, which forced them to take a break from the workaday world. Their time was theirs together, unscheduled. So, amid all the turmoil of the pandemic, they saw an opportunity to rehearse their retirement.

Rehearsal helps performance. It conditions us. It informs our expectations. It lets us anticipate how we’ll handle a situation. Even improvisers rehearse.

Research suggests rehearsal can help retirement, too.

Forethought alone helps workers invest more for retirement. A study by Capital Group found that adults who envisioned their retirements recommended setting aside 31% more per paycheck than those not asked to picture their futures. According to the 2020 Retirement Confidence Survey from the Employee Benefit Research Institute, 84% of workers with the foresight to have a retirement plan saved any money for retirement, vs. 17% of those with no plan.

Even beyond the money side, premeditation and practice can help individuals ease into retirement emotionally.

Pandemic effects
Some early findings suggest:

  • Baby boomers are retiring at a faster pace. The Pew Research Center reportsthat in the third quarter of 2020, 28.6 million boomers were retired, up 3.2 million from the year before, outpacing the usual gain of 2 million a year.
  • Some older workers are reconsidering their retirement timing. About 24% of workers 50 and older said because of the pandemic they have delayed or might delay when they retire, according to another Pew survey. For those who lost work or suffered pay loss through the pandemic, 46% expect to retire later than before.
  • Americans 62 and older in the upper third of incomes retired at a greater rate during the pandemic than in the Great Recession, according to the Center for Retirement Research at Boston College.

“The fear of running out of money is only one dimension of retirement. COVID-19 has caused drastic changes to daily routines and contributed to conditions similar to what many experience daily in retirement,” Joseph Coughlin, director of the AgeLab at the Massachusetts Institute of Technology, wrote in Forbes. “Many of us may be concerned with having saved too little for retirement, but are we prepared for the problem of having too much time?”

In exploring her own path out of her career, Teresa Amabile, a psychologist at the Harvard Business School, has been studying the traits of well-adjusted retirees.

“My husband likes to say I wanted an evidence-based retirement for myself,” Amabile said in an interview with Harvard Business Review. “So I was very curious about how people approach it and what makes for a good retirement life.”

She has learned that those who make easier shifts are those who restructure their new life and find ways to bridge between how they viewed themselves as a worker and how they want to identify as a retiree.

“So much of our identity is almost necessarily wrapped up in our work,” Amabile said. “So much of our mind space is occupied by our work.”

That’s how rehearsing retirement can help: Taking time to try out retirement before you call it quits at work. It’s something Amabile has been able to do by working part-time, gradually exiting her job and getting a taste of what to expect from retirement.

Similarly, in his book, “Shifting Gears: 50 Baby Boomers Share Their Meaningful Journeys in Retirement,” Richard Haiduck found that the smoother transitions were made by individuals who phased into retirement, rehearsing it instead of leaving work cold turkey.

Occasionally in recent years, I have used days off to try to pretend what life would be like as a retiree. The pandemic has offered a better simulation.

Of course, my wife and I have been fortunate to have kept our jobs, so we have had dependable income and benefits that we wouldn’t expect in retirement. Still, we have been homebound together for much of the last year. Based on that, here are some lessons I expect to apply to my retirement:

  • Let investment plans play out. By the time I calculated the paper losses in our retirement accounts from the financial market crash in March 2020, we already were recovering and on our way to sizable gains. Our allocations remained close to what we had set a few years earlier with our investment advisor, who later recommended tweaks to rebalance the portfolio for our future.
  • Establish routines. Being forced out of old routines helped me form new ones. I have structured my weekdays to include more self-care, including longer walks with the dog at dawn, an earlier start to work, regular breaks from the computer during the workday and after-work strolls with my wife.
  • Stay creative. During the pandemic, I have accomplished more reading, writing and reading about writing. I’ve been enjoying such diversions, honing skills that can help my work and pursuing interests I imagine following in retirement.
  • Maintain relationships. My wife and I have managed to stay out of one another’s way during the day and still spend more meaningful time, more routinely, with walks, evening meals, card games and streamed entertainment. We have a weekly Zoom catch-up with our daughters. And I’ve fought an aversion to phone calls to more regularly stay in touch with my siblings.
  • Keep communicating. On our walks, my wife and I have been able to talk more about many things, including retirement. We don’t have answers yet like when or where or how exactly or what we’ll do when we get there. But we’re thinking out loud about it so that as we get closer, we can be on the same page.

And though the pandemic has allowed us limited peeks into retirement, it has also kept us from activities we’d like to include in our rehearsal, including travel, socializing and live entertainment.

Other Money Talk articles from Joel Dresang

Amid all the setbacks and tragedy of the pandemic, the past year reminds us that not all retirements go as planned. Retirement often results from circumstances beyond our control. For that matter, even fire drills are a form of rehearsal.

Joel Dresang is vice president-communications at Landaas & Company.

Learn more
Trying to transition off a treadmill, by Joel Dresang
Retirement investing: Where to begin, a Money Talk Video with Kyle Tetting
Stocks: Long-term, consistent returns, a Money Talk Video with Dave Sandstrom
Safe investment withdrawals for retirees, a Money Talk Video with Art Rothschild
Retirement 101: Having a plan, a Money Talk Video with Tom Pappenfus
The importance of balance, a Money Talk Video
(initially posted April 29, 2021)

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